Key Takeaways
- • Private equity professionals are adopting a more selective and cautious approach to M&A activity in 2026, conducting enhanced due diligence despite substantial dry powder availability for deployment.
- • Global market volatility driven by interest rates, inflation, and geopolitical uncertainty remain the primary headwinds constraining deal velocity, with European firms facing particular pressure from regulatory challenges.
- • Mid-market and smaller transactions—which represent the majority of M&A volumes—remain subdued, though confidence levels vary significantly across regions, with North America and Asia-Pacific showing stronger optimism than Europe.
- • Despite near-term caution, over 70% of PE professionals report portfolio performance meeting or exceeding expectations at both the 3-year holding mark and exit, signaling underlying operational resilience.
- • Financial services and technology & telecommunications remain the top investment targets, attracting 51% and 47% of investor capital respectively, with sponsors expected to remain selective in professional services sector activity.
Summary
Private equity firms are demonstrating increased caution in merger and acquisition decision-making as they navigate persistent global uncertainty in 2026, according to research from Forvis Mazars surveying over 300 PE professionals worldwide. The apparent paradox—substantial capital availability combined with heightened selectivity—reflects a fundamental shift in how the sector is approaching deal execution. While PE funds retain significant dry powder for deployment, they are implementing more rigorous due diligence protocols and creative dealmaking strategies rather than pursuing aggressive acquisition timelines.
The primary constraints on deal activity center on macroeconomic headwinds that have sustained pressure on the sector over an extended period. Global market volatility driven by interest rates and inflation continues to represent the largest challenge facing PE professionals, directly impacting both short-term portfolio gains and long-term investment strategy formulation. Mid-market and smaller transactions, which constitute the majority of M&A deal volumes, remain particularly subdued, with confidence levels remaining uneven across geographies and investment thesis categories.
Regional divergence in sentiment is pronounced. North America and Asia-Pacific PE professionals report substantially greater confidence in portfolio growth prospects and deal opportunities in 2026, while European firms face more significant headwinds from geopolitical uncertainty and heightened regulatory pressures. This geographic split is shaping capital deployment patterns and influencing sector preferences. Financial services and technology & telecommunications sectors are emerging as primary investment targets, attracting 51% and 47% of investor interest respectively, though sponsors are expected to maintain selectivity in professional services activity.
Despite near-term acquisition caution, portfolio performance metrics suggest underlying operational strength. Over 70% of surveyed PE leaders reported that their portfolio companies perform either better than planned or in line with expectations, both at traditional 3-year holding intervals and at exit events. This disconnect between cautious deal sourcing and strong portfolio performance indicates that PE firms are prioritizing operational value creation and selective capital deployment over rapid acquisition velocity, positioning themselves to capitalize on opportunities as macro conditions stabilize.
The primary constraints on deal activity center on macroeconomic headwinds that have sustained pressure on the sector over an extended period. Global market volatility driven by interest rates and inflation continues to represent the largest challenge facing PE professionals, directly impacting both short-term portfolio gains and long-term investment strategy formulation. Mid-market and smaller transactions, which constitute the majority of M&A deal volumes, remain particularly subdued, with confidence levels remaining uneven across geographies and investment thesis categories.
Regional divergence in sentiment is pronounced. North America and Asia-Pacific PE professionals report substantially greater confidence in portfolio growth prospects and deal opportunities in 2026, while European firms face more significant headwinds from geopolitical uncertainty and heightened regulatory pressures. This geographic split is shaping capital deployment patterns and influencing sector preferences. Financial services and technology & telecommunications sectors are emerging as primary investment targets, attracting 51% and 47% of investor interest respectively, though sponsors are expected to maintain selectivity in professional services activity.
Despite near-term acquisition caution, portfolio performance metrics suggest underlying operational strength. Over 70% of surveyed PE leaders reported that their portfolio companies perform either better than planned or in line with expectations, both at traditional 3-year holding intervals and at exit events. This disconnect between cautious deal sourcing and strong portfolio performance indicates that PE firms are prioritizing operational value creation and selective capital deployment over rapid acquisition velocity, positioning themselves to capitalize on opportunities as macro conditions stabilize.
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